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Small caps movers: Restless week for eve Sleep as CEO departs after “strategic missteps”

A look back at some of the more interesting stories from the junior market over the past week...
sleepy woman
Even a tie-up with Dreams couldn't soothe eve's shareholders this week

eve Sleep PLC (LON:EVE) investors were given a rude awakening this week as the mattress-in-a-box maker parted ways with its chief executive and co-founder after blaming a series of “strategic missteps” by management for what essentially amounted to a profit warning.

The company, which only joined the junior market last May, said it had spread itself too thinly and lost focus on creating an “aspirational sleep brand” in its core markets.

As a result of the “challenging” first half trading, eve Sleep said it will pivot back towards those key markets, although it still isn’t quite sure which ones they are, so it is carrying out an evaluation of its existing operations to figure out where it should be directing its efforts.

While the firm expects the changes to serve as a boost in the future, in the near-term it warned that sales and profits would both be lower than expected, although it will try to protect the bottom line by trimming some of its costs.

Even a new partnership with beds retailer Dreams didn’t go down too well, with analysts warning that, although it creates a new distribution channel, the tie-up could end up cannibalising higher-margin direct-to-consumer sales.

eve Sleep shares slumped by more than 61% to 26p across the week.

Car telematics firm TrakM8 Holdings PLC (LON:TRAK) was another which lost its way this week as it cautioned on its first-half sales.

The firm, which also makes dashboard cameras, actually reported a rise in profit for the year just gone but said revenue in the current half would be down year-on-year due to “customer inventory build-up" in the fourth quarter.

TrakM8 tried to reassure by explaining that its full-year results would still be “higher” than last time, but the market was having none of it, with the stock shedding 22% to 82p.

Water treatment specialist Modern Water PLC (LON:MWG) was flowing higher though after entering into a joint venture which will take its technology into the potentially lucrative Chinese market.

Working with Chinese environmental technology firm Sunup, the new JV – called Encyclo – will promote Modern’s AMBC brine concentration technology and exclusively use it in all projects in the country which require that kind of water treatment.

As part of the deal, Sunup has also agreed to subscribe for £552,000 worth of Modern Water shares, for which it agreed to pay a slight premium. That’s a decent investment in a company with a market cap of less than £8mln.

Modern Water also got some good news earlier in the week, when it revealed that a wastewater treatment plant which it helped build in India using its AMBC system had officially opened. The shares jumped 36% across the week to 10p.

Overall it’s been a decent week for the junior market, with the AIM All Share index up 6 points to 1,085.2.

That was enough to beat the blue-chips on the FTSE 100, which lost 15 points to sit at just below 7,581 come Friday.

AJ Bell investment director Russ Mould had some kind words to say about AIM this week, claiming that it is defying critics who think of it as nothing more than a glorified casino.

“The AIM 100 index is up 5.1% so far in 2018 versus a 1% decline from the FTSE All-Share (which is often considered to be the benchmark for the broader UK stock market) and a 1.1% drop in the FTSE 100,” he said.

“The best performers include software group WANdisco PLC (LON:WAND) which is up by 92.6%; and polling business YouGov which is 56.7% higher year-to-date.”

Mould also pointed out that over half of the AIM 100 companies, including Fevertree Drinks PLC (LON:PEVR) and owner Dart Group PLC (LON:DTG) would be eligible for the FTSE 250 if they decided to move, while online fashion giant ASOS PLC (LON:ASC) would qualify for inclusion in the FTSE 100.

Away from the bragging and back to the movers, UK Oil & Gas Investments PLC (LON:UKOG) endured something of a rollercoaster week.

A tweet from David Lenigas about the ongoing flow testing at Horse Hill sent shares in the company soaring on Monday afternoon.

Lenigas, the serial small cap investor, who is executive chairman at Doriemus which also has a stake in the ‘Gatwick Gusher’, said the oil flowing from the HH-1 well was “better quality than North Sea Brent”.

Investors, eager for any updates on how the much-hyped field’s well testing is going, dived in, sending the share price up by more than 20%.

Rather cheekily, UKOG used that rise to knock out another £2mln placing, having raised £10.5mln over the past few weeks. That brought shares back down, and they closed the week 15% lower at 1.9p.

Elsewhere, a bid approach from a Chinese firm sent Sinclair Pharma PLC’s (LON:SPH) stock surging on Thursday afternoon.

The beauty products maker had already been on the up that day having reported better-than-expected half-year sales figures, but they were shot even higher on the back of the takeover chatter.

Sinclair confirmed it received an approach from China Grand Enterprises and its affiliate company Huadong Medicine Co., Ltd which may or may not result in an offer for the group. Shares finished the week up more than 20% at 22p.

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